In re: INTERWORKS UNLIMITED INC.,

Case Type:
Business
Case Status:
Affirmed
Citation:
CC-22-1027-STL (9th Circuit, Aug 19,2022) Not Published
Tag(s):
Ruling:
A series of errors by the trustee's attorney led the BAP to hold that the relation back doctrine found in Fed. R. Civ. P. 15(c) did not save the trustee's adversary proceeding. The original adversary proceeding complaint was filed in the wrong case, the trustee's attorney did not serve the summons for that complaint on the defendant, and the trustee dismissed the original complaint with prejudice. As a result of the dismissal, there was nothing for the trustee's new complaint to relate back to.
Procedural context:
The trustee appealed the decision of the bankruptcy court that held that the trustee's complaint was time-barred under §§ 108(a) and 546, and the new complaint did not relate back to a complaint filed in the wrong bankruptcy case.
Facts:
The chapter 7 trustee for Interworks Unlimited, Inc. waited until hours before the deadline for commencing an adversary proceeding for recovery from Hai Ou Yang for breach of contract and avoidance of fraudulent transfers. The trustee filed the adversary proceeding in the wrong bankruptcy case. The complaint properly identified Interworks as the debtor, and the caption used the case number of the Interworks bankruptcy case. However, the trustee's counsel accidentally filed the adversary proceeding in an unrelated bankruptcy case. The clerk of court issued a summons in the wrong bankruptcy case. The trustee never served this summons on Yang. Within a few days of the filing of the complaint, the clerk of court entered a notice, informing the trustee that there was a mismatch between the base bankruptcy case name and the base bankruptcy case number. The notice stated, "THE FILER IS INSTRUCTED TO FILE A NOTICE OF WITHDRAWAL USING WITHDRAWAL DOCKET EVENT AND REFILE THE DOCUMENT USING THE CORRECT DOCKET EVENT THAT MATCHES THE DOCUMENT." The trustee waited nearly three months before taking any action when he filed a new adversary proceeding against Yang in the Interworks bankruptcy case. A new summons was issued, and the summons and complaint were served on Yang. The trustee then filed a notice of dismissal with prejudice of the adversary proceeding that was filed in the wrong bankruptcy case. The trustee then amended the complaint to add more detailed allegations regarding the debtor's financial conditions and funds transfers between the debtor and Yang. Yang moved to dismiss the Interworks adversary proceeding under Rule 12(b)(6), alleging that the claims were time-barred by §§ 108(a) and 546.
Judge(s):
SPRAKER, TAYLOR, and LAFFERTY, Bankruptcy Judges

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